| COUNTRY PERSPECTIVES
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ALGERIA |
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Country presentation |
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Introduction |
Contingent to Europe, Africa, and Arab nations, Algeria is the largest of the five Maghreb countries (Mauritania, Morocco, Algeria, Tunisia and Libya), the second largest country on the African continent after Sudan and tenth largest in the world. This strategic geographic location offers many advantages likely to boost investment potential, in particular foreign investment in export-oriented activities. The hydrocarbons sector is the backbone of the economy. At the beginning of the 90s, the Algerian government started a process of transition from a centralised to a market-oriented economy by implementing stabilisation and structural adjustment programmes with the technical assistance and financial support of the IMF, the World Bank, and the European Union.
A significant progress has been made in structural reforms thanks to this programme, financial and economic indicators have been successfully stabilised, and a more dynamic private sector is emerging, attracting greater inflows of foreign direct investments (FDI). Algeria’s economic growth has continued to be underpinned by ongoing growth in oil and gas exports, (revenues from hydrocarbons represent 97 percent of export earnings from goods and non factor services), leading to a large increase in the trade surplus (US$ 50 billion). Thus, GDP grew from around 3 percent in 2000-02 to nearly 6 percent in 2003-04 and 5.1 percent in 2005. Thanks to taxes on oil, which represent more than 60 percent of public revenue, this comfortable financial situation led authorities to pursue an expansionist budgetary policy and launch the Complementary Plan for Support to Growth (Programme complémentaire de soutien à la croissance – PCSC), which earmarks public expenditure for the period 2005-09, and the National Programme for Agricultural Development (PNDA).
Per capita GDP rose from US$ 1,783 in 2002 to US$ 3,100 in 2005, with purchasing power parity estimated at US$ 7,189 in 2005, fuelling an improvement in living standards throughout Algeria.
Multi-year projections in the 2005 finance law show an average growth rate of 5.3 percent a year over the period 2005-2009. Prudent management of oil income has enabled Algeria to reduce debt while maintaining reserves. Thanks to the Central Bank of Algeria’s restrictive monetary policy, inflation was kept down to 3.6 percent in 2004 and 1.5 percent in 2005. With public debt rolled back to 24.7 percent, foreign-exchange reserves equivalent to nearly 24 months of imports and a surplus in the overall budget, Algeria has finally succeeded in attaining economic stability. The unemployment rate fell from 23.7 percent in 2003 to 17 percent in 2004 and 13 percent in 2005.
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Challenges |
Renewed growth is being led mainly by oil resources, a particularly vulnerable development model in the long run. With 48 percent added value, the hydrocarbons sector is the main source of revenue for the economy (95 percent of export earnings). This makes Algeria’s external position particularly vulnerable, with Algerian exports among the least diversified of all middle-income countries.
The relatively high unemployment rate (13 percent according to ANDI official figures) is detrimental to social development and unemployment among young people remains persistently high (45 percent).
Agricultural development faces multiple constraints, in particular a shortage of agricultural land, insufficient output, and heavy dependency on weather conditions. |
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Strong points |
Algeria’s major assets and comparative advantages are as follows :
- Proximity and easy access to potential markets. Contingent to Europe, Africa and Arab countries, Algeria’s strategic location greatly boosts its investment potential, particularly attractive for export-oriented foreign investment;
- Large domestic market (33 million consumers);
- Important natural resources (oil, gas, etc.). Other mineral resources remain greatly under exploited, particularly phosphates and iron;
- Abundant human resources and flexible labour market, the many universities, national;
- University level colleges specialised in professional training (grandes écoles) and vocational training centres ensuring the availability of skilled personnel. |
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References |
| Capital |
Algiers |
| Surface area |
2 381 741 km² |
| Population |
33.9 millions inhabitants (2005) |
| Languages |
Arabic, French, Berber |
| GNP (dollars) |
US$ US 102 bn (2005) |
| GNP/per capita (dollars) |
US$ US 3,085 - 7,189 in ppp |
| Currency |
Algerian Dinar (DZ)
1 Euro = 95,19 DZ – 1 US$ = 71,23 DZ (2005) |
| Religion |
Sunni Muslims (99 %) |
| National holiday |
5th July (independence in 1962) |
| Association Agreement with EU |
Signed in 2002, implemented on 1st September 2005.
EU web site: http://www.deldza.cec.eu.int
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| WTO membership |
Observer since 1985. Membership being negotiated. |
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Sources: World Bank, FMI, World Development Indicators 2006 and IMF, Article IV Consultation 2005, Country report. |
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